15:10 PM, 21st April 2011, About 10 years ago 8
The buy to let mortgage market has seen a wind change in recent weeks and lenders loosening their purse strings with higher loan to values and better rates for property investors.
Market watchers can sense a change in mood from banks and building societies as buy to let picks up. The main damage to the housing market has been the demise of the first time buyer.
With indeterminate job prospects, little savings and often chequered credit histories, the number of first time buyers who can afford to purchase a home has dropped away.
Buy to let landlords are a completely different market; they are older, have an established credit profile over decades rather than a few years, and more importantly, they have cash to pile in to a loan to reduce the risk for lenders.
This viewpoint is not a wild, unsupported assumption because the evidence for buy to let is stacking up:
For instance, independent financial research firm Datamonitor has issued a report suggesting buy to let is the only sector of the mortgage market that is likely to flourish over the next three or four years.
Another financial firm specialising in property investment, Assetz, has released a study that claims first time buyers are deliberately excluded from lending in favour of property investors.
Stuart Law, chief executive of Assetz, said: “Lenders make no secret that they would rather allocate the limited funds they do have to the lower risk option of buy to let loans, with deposits of 25-40%, than first-time buyers loans with 90% loan to values.
“As a result, the buy to let sector is recovering at a remarkable rate, as investors are drawn back by the need for a long-term, low-risk investment for their cash.
“The buy to let sector has not been as hard hit by the recession as people feared, due to the fact that interest rates have remained extremely low. This has protected landlords by giving them cash flow, and future rate rises, which are likely to be small and gradual, will be covered largely by rental increases.”
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